DON’T MAKE THE FIRST REALISTIC OFFER.

December 12, 2012 at 4:26 PM · Economics, History, Politics

DON’T MAKE THE FIRST REALISTIC OFFER. Back at an earlier American fiscal cliff—in 2011—I compared the negotiations to a chicken game. Dick Weisfelder pointed out here that real life negotiations are more complex than the simple chicken game model; the details are important. In connection with the looming December 31 fiscal cliff, Dick has sent me this interview with Professor Christopher Kingston, who is currently teaching a game theory course at Amherst. Kingston points out ways that both political parties are trying to make commitments that will strengthen their bargaining positions. He compares these devices to William the Conqueror burning his boats to show that he was not going to retreat. He notes that the December 31 deadline does not provide “a truly credible commitment device” because a lot of things can be done retroactively. (If I had to place a bet, I would bet that the can will be kicked down the road.) Kids, I want to highlight one point that Professor Kingston makes: “at this stage [the date is December 4] it would not make sense for either side to make a proposal that involved a realistic compromise….” Litigators are told the same kind of thing, and there is some empirical support for the proposition. The idea is that a realistic offer may be more than your adversary had ever hoped for.

2 comments

Nick December 14, 2012 at 5:38 PM

Is all of this assuming positional bargaining instead of interested-based bargaining?

Dick Weisfelder December 15, 2012 at 3:57 PM

It does, Nick, but there is a problem for Boehner and Obama, namely that the public expects this hard positional bargaining. When Obama tried the interest-based approach in his first term, he was accused of conceding too much and getting too little of what he needed. He acted as if he had read and absorbed much of Roger Fisher’s, “Getting to Yes.”

The problem is that Norquist, DeMint and many tea party supporters have acted out the role of an irrational player, willing to take huge risks rather than negotiate a acceptable compromise. The classic model was a chicken game between two players coming head on a narrow road. The first to swerve was “chicken.” But what is the rational way for a player to act if his/her opponent puts on a blindfold? (“Rebel without a Cause” had a version of the game with James Dean as one of the players. In this case both drivers were side by side headed for a cliff. That version gives more options than the head to head version.